What changed in this filing

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Item 1. Financial Statements

2023-11-13 compared with 2023-08-11 · 142 added, 90 removed, 914 unchanged (20% of the section changed)

3 unchanged sentences

and Subsidiary

September 30,

Consolidated Balance Sheets

28 unchanged sentences

Total liabilities

1,004,483,448

Shareholders' Equity

21 unchanged sentences

and Subsidiary

Three Months Ended June 30,

Three Months Ended September 30,

Consolidated Statements of Income

33 unchanged sentences

and Subsidiary

Six Months Ended June 30,

Nine Months Ended September 30,

Consolidated Statements of Income

34 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended June 30,

Three Months Ended September 30,

Other comprehensive loss, net of tax:

5 unchanged sentences

( 7,092,721 )

Total comprehensive income (loss)

Total comprehensive loss

$ ( 710,291 )

Six Months Ended June 30,

Other comprehensive income (loss), net of tax:

Unrealized holding gain (loss) on securities AFS arising during the period

$ ( 3,482,215 )

Other comprehensive gain (loss), net of tax

Nine Months Ended September 30,

Other comprehensive loss, net of tax:

Unrealized holding loss on securities AFS arising during the period

( 3,615,720 )

( 27,078,956 )

Other comprehensive loss, net of tax

( 2,856,418 )

( 21,392,376 )

Total comprehensive income (loss)

4 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

shareholders'

3 unchanged sentences

Cumulative change in accounting principle (Note 2)

Balance at January 1, 2023 (as adjusted for change in

accounting principle)

Balance at January 1, 2023 (as adjusted for change

in accounting principle)

Issuance of common stock

13 unchanged sentences

Preferred stock

Comprehensive income

Comprehensive loss

Other comprehensive loss

4 unchanged sentences

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,258,852 )

Preferred stock

Comprehensive loss

Other comprehensive loss

( 4,072,800 )

September 30, 2023

$ ( 23,524,235 )

$ ( 2,622,777 )

*Accumulated other comprehensive loss

3 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

shareholders'

1 unchanged sentence

$ ( 1,166,971 )

$ ( 2,622,777 )

Issuance of common stock

1 unchanged sentence

( 1,236,880 )

Preferred stock

5 unchanged sentences

$ ( 9,911,608 )

$ ( 2,622,777 )

Issuance of common stock

1 unchanged sentence

( 1,240,049 )

Preferred stock

5 unchanged sentences

$ ( 15,466,626 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,243,187 )

Preferred stock

Comprehensive loss

Other comprehensive loss

( 7,092,721 )

September 30, 2022

$ ( 22,559,347 )

$ ( 2,622,777 )

*Accumulated other comprehensive loss

3 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization, bank premises and equipment

10 unchanged sentences

(Decrease) increase in taxes payable

Decrease (increase) in interest receivable

Increase in interest receivable

Decrease in mortgage servicing rights

6 unchanged sentences

Increase (decrease) in interest payable

(Decrease) increase in accrued expenses

Decrease in accrued expenses

Increase in other liabilities

4 unchanged sentences

( 3,991,124 )

( 47,476,763 )

Proceeds from redemption of restricted equity securities

1 unchanged sentence

( 3,528,300 )

Decrease in limited partnership contributions payable

( 1,823,301 )

Investments in limited liability entities

9 unchanged sentences

Cash Flows from Financing Activities:

Net decrease in demand and interest-bearing transaction accounts

( 41,275,644 )

Net (decrease) increase in demand and interest-bearing transaction accounts

( 20,211,447 )

2 unchanged sentences

Net increase (decrease) in time deposits

Net increase (decrease) in repurchase agreements

( 1,124,017 )

Net decrease in repurchase agreements

( 1,497,403 )

Net increase in short-term borrowings

Proceeds from long-term borrowings

Repayments on long-term borrowings

Decrease in finance lease obligations

3 unchanged sentences

( 2,778,271 )

Net cash used in financing activities

( 31,836,771 )

( 10,895,490 )

Net cash provided by financing activities

Net decrease in cash and cash equivalents

5 unchanged sentences

Supplemental Schedule of Noncash Investing and Financing Activities:

Change in unrealized gain (loss) on securities AFS

Change in unrealized loss on securities AFS

$ ( 3,615,720 )

$ ( 27,078,956 )

Common Shares Dividends Paid:

Dividends declared

Decrease in dividends payable attributable to dividends declared

Increase in dividends payable attributable to dividends declared

Dividends reinvested

40 unchanged sentences

Held-to-maturity

Borrower-in-Custody

Bankers Healthcare Group

Insured Cash Sweeps of the IntraFi Network

Board of Directors

Borrower-in-Custody

Internal Revenue Service

Bank owned life insurance

Board of Directors

Jobs for New England

Bank owned life insurance

Basis point(s)

Bank Term Funding Program

London Interbank Offered Rate

Certificate of Deposit Accounts Registry

Bank Term Funding Program

Mortgage-backed security

Service of the IntraFi Network

Certificate of Deposit Accounts Registry

Mortgage servicing rights

Certificates of deposit

Service of the IntraFi Network

Net interest income

Core deposit intangible

Certificates of deposit

Other amortizing security

Current Expected Credit Loss

Core deposit intangible

Off-balance sheet

Community Financial Services Group, LLC

Current Expected Credit Loss

Other comprehensive income (loss)

Community Financial Services Group, LLC

Other real estate owned

CFS Partners:

Community Financial Services Partners,

Other real estate owned

Other-than-temporary impairment

Collateralized Mortgage Obligations

Private mortgage insurance

Collateralized Mortgage Obligations

Paycheck Protection Program

Community Bancorp.

and Subsidiary

Paycheck Protection Program

Commercial Real Estate

USDA Rural Development

Discounted cash flow

Commercial Real Estate

Small Business Administration

Demand Deposit Account(s)

Discounted cash flow

Securities and Exchange Commission

Depository Trust Company

Demand Deposit Account(s)

Secured Overnight Financing Rate

Dividend Reinvestment Plan

Depository Trust Company

Troubled-debt restructuring

Dividend Reinvestment Plan

Department of Agriculture

Exchange Act:

Securities Exchange Act of 1934

Department of Agriculture

Financial Accounting Standards Board

Veterans Administration

Financial Accounting Standards Board

Recent Accounting Developments

1 unchanged sentence

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and has issued subsequent amendments thereto, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and has issued subsequent amendments thereto, which provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

6 unchanged sentences

2020-04 and its impact on the transition away from LIBOR for its Junior Subordinated Debentures due December 15, 2037, the Company’s only financial instruments that utilize LIBOR as a reference rate.

That transition will become effective for the Debentures as of the first London banking day after June 30, 2023 (see the Interest Rate Risk and Asset and Liability Management section of the accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations following these Notes).

That transition became effective for the Debentures as of the first London banking day after June 30, 2023 (see the Interest Rate Risk and Asset and Liability Management section of the accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations following these Notes).

In March 2023, the FASB issued ASU No.

13 unchanged sentences

Accounting Standards Adopted in 2023

The Company adopted the following accounting standards effective January 1, 2023, and applied them to the Company’s interim consolidated financial statements beginning with the quarter ended March 31, 2023.

The Company adopted the following accounting standards effective January 1, 2023, and applied them to the Company’s interim unaudited consolidated financial statements beginning with the quarter ended March 31, 2023.

Prior periods have not been restated as a result of adoption of these accounting standards.

21 unchanged sentences

The following tables illustrate the calculation of earnings per common share for the periods presented, as adjusted for the cash dividends declared on the preferred stock:

Three Months Ended June 30,

Three Months Ended September 30,

Net income, as reported

4 unchanged sentences

Earnings per common share

Six Months Ended June 30,

Nine Months Ended September 30,

Net income, as reported

6 unchanged sentences

Debt securities AFS as of the balance sheet dates consisted of the following:

June 30, 2023

September 30, 2023

GSE debt securities

13 unchanged sentences

$ 192,918,109

The Company had investments in Agency MBS exceeding 10 % of shareholders’ equity with a book value of $ 129.3 million and $ 135.2 million, respectively, and a fair value of $ 110.4 million and $ 115.2 million, respectively, at June 30, 2023 and December 31, 2022.

The Company had investments in Agency MBS exceeding 10 % of shareholders’ equity with a book value of $ 130.2 million and $ 135.2 million, respectively, and a fair value of $ 106.8 million and $ 115.2 million, respectively, at September 30, 2023 and December 31, 2022.

Investment securities pledged as collateral for repurchase agreements consisted of certain U.S.

2 unchanged sentences

The aggregate amortized cost and fair value of these pledged investments as of the balance sheet dates were as follows:

June 30, 2023

September 30, 2023

December 31, 2022

There were no sales of debt securities during the first six months of 2023 or 2022.

Investment securities pledged as collateral for BTFP borrowings consisted of U.S.

Government securities and U.S.

GSE debt securities with an aggregate amortized cost of $49,934,319 and fair value of $42,323,851 at September 30, 2023.

The Company began utilizing the BTFP during 2023 as a source of liquidity.

For more information on these borrowings, see the Liquidity and Capital Resources section of the accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations following these Notes.

There were no sales of debt securities during the first nine months of 2023 or 2022.

The scheduled maturities of debt securities as of the balance sheet dates were as follows:

June 30, 2023

September 30, 2023

Due in one year or less

15 unchanged sentences

12 months or more

June 30, 2023

September 30, 2023

GSE debt securities

18 unchanged sentences

Under the ASU, if the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the credit loss is recorded through an allowance rather than as a write-down of the security.

As of June 30, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the debt securities AFS in an unrealized loss position prior to recovery.

As of June 30, 2023, the Company also determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.

As of September 30, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the debt securities AFS in an unrealized loss position prior to recovery and determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.

The Company concluded that the unrealized losses were primarily attributed to increases in market interest rates since these securities were purchased under other market conditions.

4 unchanged sentences

The composition of net loans as of the balance sheet dates was as follows:

June 30, 2023

September 30, 2023

December 31, 2022

12 unchanged sentences

The provision for credit losses was made up of the following components for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

Provision for loan losses

1 unchanged sentence

Provision for credit losses

Six Months Ended June 30,

Nine Months Ended September 30,

Provision for loan losses

1 unchanged sentence

Provision for credit losses

The following tables present the activity in the ACL on loans for the three and six month periods following adoption of ASU 2016-13 (CECL) on January 1, 2023 and select information on impairment evaluation by portfolio segment for those interim periods.

As of or for the three months ended June 30, 2023

The following tables present the activity in the ACL on loans for the three- and nine-month periods following adoption of ASU 2016-13 (CECL) on January 1, 2023 and select information on impairment evaluation by portfolio segment for those interim periods.

As of or for the three months ended September 30, 2023

ACL beginning balance

1 unchanged sentence

ACL ending balance

As of or for the six months ended June 30, 2023

As of or for the nine months ended September 30, 2023

ACL beginning balance

19 unchanged sentences

$ 748,548,608

As of or for the six months ended June 30, 2022

As of or for the nine months ended September 30, 2022

ALL beginning balance

8 unchanged sentences

The following is an age analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:

June 30, 2023

September 30, 2023

Commercial & industrial

17 unchanged sentences

The following tables present the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing as of the dates presented.

June 30, 2023

There were no nonaccrual loans with an ACL at September 30, 2023.

September 30, 2023

Commercial & industrial

7 unchanged sentences

Residential real estate - Jr lien

As of June 30, 2023, there were no residential real estate loans in process of foreclosure, compared to 5 residential real estate loans with an aggregate balance of $195,082 in process of foreclosure at December 31, 2022.

As of the balance sheet dates presented, residential real estate loans in process of foreclosure consisted of the following:

Number of loans

September 30, 2023

December 31, 2022

Allowance for loan losses (prior to adoption of CECL)

21 unchanged sentences

The Company's PD and LGD assumptions may be derived from internal historical default and loss experience or from external data where there are not statistically meaningful loss events for a loan segment, or it does not have default and loss data that covers a full economic cycle.

As of June 30, 2023, the primary macroeconomic drivers used within the DCF model included forecasts of civilian unemployment and changes in national gross domestic product (GDP).

As of September 30, 2023, the primary macroeconomic drivers used within the DCF model included forecasts of civilian unemployment and changes in national gross domestic product (GDP).

Management monitors and assesses its macroeconomic drivers at least annually (generally in the fourth quarter, or more frequently as circumstances warrant) to determine whether they continue to be the most predictive indicator of losses within the Company's loan portfolio, and these macroeconomic drivers may change from time to time.

3 unchanged sentences

Management monitors and assesses the forecast and reversion period at least annually, or more frequently as circumstances warrant.

The Company used a one-year forecast and reversion period to calculate the ACL on loans as of June 30, 2023.

The Company used a one-year forecast and reversion period to calculate the ACL on loans as of September 30, 2023.

When the DCF method is used to determine the ACL, management does not adjust the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

15 unchanged sentences

This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available.

During the third quarter of 2023, the qualitative factor for collateral in the CRE loan segment was adjusted to reflect the stable values of real estate in the commercial sector.

The qualitative factors are determined based on the various risk characteristics of each loan segment.

38 unchanged sentences

However, when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The following table presents the amortized cost basis of collateral-dependent loans as of June 30, 2023, by collateral type:

The following table presents the amortized cost basis of collateral-dependent loans as of September 30, 2023, by collateral type:

Commercial & industrial

1 unchanged sentence

Residential real estate - 1st lien

Including, but not limited to, inventory, equipment and accounts receivable.

Including, but not limited to, inventory, equipment and accounts receivable, but excluding real estate.

Impaired loans, by portfolio segment, prior to adoption of ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures), were as follows:

13 unchanged sentences

Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred net loan costs of $ 11,517 .

As of June 30, 2022

As of September 30, 2022

Investment (1)

Related allowance recorded

Commercial & industrial

Commercial real estate

Residential real estate - 1st lien

Residential real estate - Jr lien

Total with related allowance

No related allowance recorded

6 unchanged sentences

Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred net loan costs of $ 12,627 .

As of June 30, 2022

As of September 30, 2022

Three Months Ended

Six Months Ended

Nine Months Ended

Related allowance recorded

Commercial & industrial

Commercial real estate

Residential real estate - 1st lien

47 unchanged sentences

The risk ratings within the loan portfolio and current period gross charge-offs, by loan segment and origination year were as follows:

As of or for the six months ended,

June 30, 2023

(In thousands)

As of or for the nine months ended,

September 30, 2023

Term Loans Amortized Cost Basis by Origination Year

(In thousands)

Commercial & Industrial:

19 unchanged sentences

Current period gross charge-offs

As of or for the six months ended, June 30, 2023, there were (i) no current period gross charge-offs within the Purchased, CRE, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments and (ii) no Special mention or Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.

Total current period gross charge-offs

As of or for the nine months ended, September 30, 2023, there were (i) no current period gross charge-offs within the Purchased, CRE, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments and (ii) no Special mention or Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.

Before the adoption of ASC 326 (CECL), the risk ratings within the loan portfolio, by segment, as of December 31, 2022, were as follows:

26 unchanged sentences

In connection with modifications, the Company takes into account applicable regulatory guidance, including a 2023 interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.

There were no loan modifications for the first six months of 2023.

There were no loan modifications for the first nine months of 2023.

Prior to adoption of ASU 2022-02, new TDRs, by portfolio segment, during the periods presented below were as follows.

1 unchanged sentence

Residential real estate – 1st lien

Six months ended June 30, 2022

Nine months ended September 30, 2022

Residential real estate – 1st lien

There were no TDRs for the three months ended June 30, 2022.

There were no new TDRs for the three months ended September 30, 2022.

There were no TDRs for which there was a payment default during the twelve-month period ended December 31, 2022.

The TDRs for which there was a payment default during the twelve-month period ended June 30, 2022 were as follows:

The TDRs for which there was a payment default during the twelve-month period ended September 30, 2022 were as follows:

Commercial real estate

64 unchanged sentences

There were no Level 3 assets or liabilities measured on a recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between Levels during either of the periods presented for 2023 or 2022.

September 30,

(market approach)

14 unchanged sentences

There were no Level 1 or Level 3 assets or liabilities measured on a non-recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between levels during either of the periods presented for 2023 or 2022.

September 30,

(market approach)

12 unchanged sentences

The estimated fair values of the Company's financial instruments as of the balance sheet dates were as follows:

June 30, 2023

September 30, 2023

(Dollars in Thousands)

44 unchanged sentences

The following table shows the changes in the carrying amount of the MSRs, included in other assets in the consolidated balance sheets, for the periods indicated:

Six Months Ended

June 30, 2023

December 31, 2022

Nine Months Ended

September 30,

Balance at beginning of year

7 unchanged sentences

The Company has evaluated events and transactions through the date that the financial statements were issued for potential recognition or disclosure in these financial statements, as required by GAAP.

On June 14, 2023, the Company’s Board declared a cash dividend of $ 0.23 per common share, payable August 1, 2023, to shareholders of record as of July 15, 2023.

On September 21, 2023, the Company’s Board declared a cash dividend of $ 0.23 per common share, payable November 1, 2023, to shareholders of record as of October 15, 2023.

This dividend has been recorded in the Company’s consolidated financial statements as of the declaration date, including shares issuable under the DRIP.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements